1. Field of the Invention
This invention relates to a new tax revenue protection and product authentication system designed to protect government agencies or brand owners from losses of tax revenues (particularly excise tax in case of governments) from the effects of product counterfeit, illegal import of excise-liable goods and cross border trading and also to protect the consumer from the dangers of consumption of counterfeit products (particularly, counterfeit drinks, tobacco, foods, pharmaceuticals, automotive spare parts) or alternatively designed to protect integrators of complex technical devices such as aircraft parts, computers and electronic devices. This system may also have military security applications for audits of inventory, etc.
2. Description of the Related Art
This invention concerns the production, use, tracking and verification through-out the circulation chain of producer/importer, distributor, retailer of a secure data label or other instrument on a product carrying both machine readable data regarding the product and preferably secure visual means to check for product authenticity using a visual optical security element such as a diffractive optical device or a thin film interference optical device. This label is coupled to a product tracking and tracing system for the government agency or commercial entity employing random data/product inspections throughout the circulation chain as a way of using inspection feedback to monitor the system.
The problem of loss of government revenue due to product counterfeit, illegal (gray) import and cross-border trading has reached a monumental scale. Billions of dollars are lost each year due to the sale of illegal goods, especially excise-liable goods. Excise evasion leads to evasion from income tax and other taxes because in some territories sales of illegal goods are unrecorded and contribute to the black market economy. Governments have long attempted to prevent this introducing various methods to ensure the legality of the goods. The most wide spread of these methods is the introduction of counterfeit-proof excise stamps (usually sequentially numbered) applied to every unit of product. This method, however, only partially solves the problem because, firstly, excise stamps themselves contain only physical security features without any data verification elements and are therefore liable to counterfeit. Practice shows that most of the time creating a consumer-passable counterfeit is enough to ensure safe sale of illegal or counterfeit product. Such counterfeit is unlikely to pass a lab test but such tests are rare and usually performed only when a major source of counterfeit goods is discovered by law enforcement agencies. Secondly, excise stamps are supplied to producers and importers in a random manner, hardly any database exists that would record the limited (albeit valuable) information that a traditional excise stamp has to offer i.e. sequential numbers and there is no information-based system that would describe both the producers and importers of the product and the product itself and allow to verify the legality of the product by tracing and verifying its route to the point of origin.
Currently various approaches have been used for product security. These include security labelling using anti-counterfeit features such as holograms, diffractive devices, threads or various forms of security print to add an authentication label or document to the good containing a difficult to counterfeit public recognition security device. Examples of such optical diffractive features are known in the art and by usage and specific examples amongst several can also be found in U.S. Pat. Nos. 4,561,41, 5,034,003, WO-A-93/18419, U.S. Pat. Nos. 5694229 and 5,483,363. Such labels can also contain a unique number usually added via overprint. However, these systems suffer disadvantages. First, they provide no tracing of the product through the distribution or retail system to protect the supplier against parallel trading. Secondly, they provide the consumer with no additional security other than their recognition of a public recognition security device and, thirdly, the security of this device against counterfeit or passing off can vary depending on the quality and technology of the device. Also there is no means for measuring or monitoring the system other than by active inspection.
A further system, as used in the drinks industry, comprises adding to the valuable items a security label containing both a visual security element for consumer recognition and verification in the form of a diffractive optical device, and also a bar-code pattern containing descriptive data for use by, for example the product issuing authority and the selling authority to reconcile and control the sale of product. This system represents an improvement over previous systems because it allows the government agency or the manufacturer to monitor and verify the sales that are made. However, the verification available to the issuing and inspection authorities or the consumer, e.g. end customer, is disadvantageously limited to the visual recognition of the optical diffractive security device.
Similarly attempts have been made by integrators of complex mechanical and electronic devices to ensure traceability of parts and components supplied to them. However, available means of authentication used have often failed to ensure the authenticity of such parts and components.